Comment 2 for bug 672388

Yes, sort of :-) I'm still working out where everything is on Ubuntu nowadays, so it can be a pain when something just stops working. In this case, I think the fault lies with the squid-deb-proxy failure rather than with apt or bind.
I would assume that the initial Proxy server entry would have been collected without trouble initially by apt and then the reference has been reset by squid-deb-proxy but I'm not sure.
The old rule of leaving the environment the way it was if you aren't successful should be applied here.
If a proxy exists when the /usr/share/squid-deb-proxy-client/apt-avahi-discover code runs, then it should still exist if the apt-avahi-discover code fails. The same should apply to any other code running.
Sorry I can't be of more help at the moment. Service discovery/zeroconf is on my list for the next few weeks.